By Brett Philbin and Jerry DiColo Morgan Stanley (MS) has been approached by several private equity firms that are interested in acquiring its commodities business, but has no interest in selling either a minority stake or the unit itself, according to a person familiar with the situation. Earlier Wednesday, CNBC reported that the securities firm is considering the sale of a minority stake in the unit and has spoken with potential suitors, including Blackstone Group L.P. (BX), citing people familiar with the matter. A Blackstone spokesman did not immediately return a message seeking comment. The CNBC report cited new regulatory requirements--under the Dodd-Frank financial overhaul law--as a reason for a potential transaction. The Volcker Rule, which restricts banks' proprietary trading operations, could hurt the banks' ability to trade in commodities. Morgan Stanley, along with rival Goldman Sachs Group Inc. (GS), has traditionally been one of the largest and most active banks in the commodity space, trading in everything from metals to grains, natural gas and crude oil. In addition to trading in futures and other derivatives, Morgan Stanley has also participated in the physical markets, buying and selling heating oil and other fuels. The firm owns pipelines through its TransMontaigne Inc. subsidiary as well as electric-power generating facilities. At the end of 2011, the firm held $9.7 billion in physical commodity assets, up from $6.8 billion in 2010, according to its annual report. The transition of Morgan Stanley to a bank-holding company from an investment bank in 2008 has called into question some of its activities in the physical commodities markets. In the annual report, filed with the Securities and Exchange Commission, the firm said it's in discussions with the Federal Reserve to determine if its commodities activities are still permitted. Last week at an investor conference, an analyst asked Goldman Sach President and Chief Operating Officer Gary Cohn if the firm could spin off its own commodities unit. Cohn acknowledged that such a move is theoretically possible, but dismissed it as an idea saying there are "enormous synergies" in having that business alongside its investment bank. Shares of Morgan Stanley recently traded up 3% at $13.24. The stock has fallen 12% year-to-date. Liz Moyer contributed to this report Write to Brett Philbin at brett.philbin@dowjones.com
